The difference in the accounting system of states has been recognised for some clip now and grounds has been put frontward to explicate these differences, but more late civilization has been put into the equation of factors that influences accounting systems and the ground why harmonisation has been slightly hard.
Accounting as defined by the American Accounting Association ( 1966 ) are the proviso of economic ( fiscal ) information for determination devising, hence accounting system might be seen as the processs and controls adopted by a state or corporation for the designation and certification of relevant minutess and events which are used in supplying information in fiscal footings.
On the other manus, accounting harmonization is the procedure of conveying the accounting criterions and demands of states every bit near as possible, since complete fusion might be hard.
Furthermore, civilization has been defined as the “ corporate scheduling of the head which distinguishes the members of one human group from another ” ( Hofstede, 1980 pp.25 ) . Every state or society portions its ain unique norms which are features common among members of such society. Hofstede ( 1980 ) demonstrated that states could be grouped into different cultural dimensions ; power distance, Uncertainty turning away, Individualism versus Collectivism, Masculinity and muliebrity. This difference in cultural dimension of states and the consequence it has on their accounting patterns has made it hard to wholly harmonise the accounting system of states. The distinctive feature of national civilizations made states follow accounting patterns suited to their environment and civilization, ( Hamid et al 1993, 1996 ) . Ross, ( 1989 ) argues that given the same information, comptrollers from different states will bring forth different consequence in line with their state ‘s accounting patterns, yet the universe is a planetary economic system and transnational companies are listed in the stock market of different states. There is demand for International Accounting Standards that would supply a guideline for harmonisation since complete fusion might non be possible yet.
A state ‘s degree of power distance depends on the extent persons of the society expects and accepts that power is unevenly distributed. High power distance states are characterised by few persons being seen as privileged. Individualism versus Collectivism measures how self-interested and personal persons are as opposed to being closely knit and integrated into groups. In an individualistic society ; people look after themselves and their immediate households while in a corporate society persons integrate into strong and cohesive groups. The tolerance of uncertainness and ambiguity topographic points a state high or low in the uncertainness turning away index. A high uncertainness avoiding state will non be unfastened to new thoughts or constructs, it will instead keep what is known and believed ( Status quo ) . Finally, maleness and muliebrity step how a state is disposed toward either the male traits or properties of assertiveness, competition or the female qualities of attention and modestness. In a masculine state there is likely traveling to be competition and showy show of accomplishments while in a feminine state one will probably detect good quality of life ( Hofstede, 1980 pp.25 ) . It should be noted that there could be different civilizations in a peculiar state. Just as states differ in their civilizations, the accounting system of states besides differs. This easy essay will analyze the influence that civilization might hold on the development of a state ‘s accounting system by looking at accounting systems of Nigeria, Iran and Saudi Arabia and comparing them with what is gettable in the USA and UK. It will besides see the deductions on international harmonisation of accounting pattern before pulling a decision.
Theoretical Development
Gray ( 1988 ) has been presented as the first to clearly associate the cultural dimensions ( Hofstede, 1980 ) of states and the values that drives their national accounting system, but much empirical plant has followed. Perera ( 1989 ) and Perera and Mathews ( 1990 ) examined the influence of civilization on the accounting patterns of developing states. Furthermore, Radebaugh and Gray ( 1993 ) related accounting values to accounting patterns and Baydoun and Willett ( 1995 ) and Willett et Al ( 1997 ) extended Gray ‘s work by seeking to operationalize states accounting values in footings of GAAP.
Gray ( 1988 ) suggested that the undermentioned accounting values are affected by civilization ; Professionalism versus statutory control, Uniformity versus flexibleness, conservativism versus optimism and secrecy versus transparence.
Professionalism
This is the penchant by comptrollers to strike single professional opinion in set abouting their undertakings as against statutory control which is the infliction of force on comptrollers to follow with legal demand or be sanctioned for non-compliance. Gray ( 1988 ) argues that if a state ranks high in individuality and low in footings of uncertainness turning away and power distance, it most probably will rank high in professionalism. It follows that in a state with high individuality, professional opinion by comptrollers will be extremely wishful because by nature these comptrollers have had their heads programmed in a belief for single determination and duty, whereas in corporate and closely knit societies the accent will be on the group position. A strong uncertainness avoiding state will prefers the position quo, non be comfy with new and unstructured information and hence will non digest professional opinion but instead tend towards statutory control of accounting profession. The contrary will obtain in a weak uncertainness turning away state were people are allowed to give their professional sentiment. There is besides a nexus between the power distance temperament of a state and its professionalism. Professionalism is likely to be high in a state with low power distance were persons experience less afraid to state their head than in a high power state where there is inequality. When comparison to the UK, Nigeria has a immense authorities intercession and control on the development of its accounting profession, which is in line with Gray ‘s hypothesis based on Hofstede ‘s categorization of the states. C.U.Uche ( 2002 )[ 1 ]argues that the mode and procedure of allowing ANAN chartered position was non consistent with professional demand.
Disclosure
The degree of secretiveness or transparence is an of import accounting value ( Arpan and Radebaugh, 1985 cited by Gray 1988 ) that is impacted on by a state ‘s cultural dimension. Disclosure varies among states, the higher a state ranks in footings of uncertainness turning away, power distance and the lower it ranks in footings of individuality and maleness the more likely it will rank high in secretiveness ( Gray, 1988 ) . The accounting revelation in an uncertainness turning away state would be low following the fact that such a state will curtail information flow to avoid struggle and competition. In Power distance society, information would be restricted and seen as the preserve of the extremely placed as a consequence of inequality. In corporate societies information are chiefly for those involved ; this will impact the degree of information revelation in the histories for public ingestion. It could so be said that states with more individuality penchant will has more revelation in their histories than states with corporate temperament. A feminine state that has an attitude of attention for quality of life will probably supply information sing environment and other societal related issues. Because of the ownership of concern ( Watts, 1977 ) , Bolshevism and swearing penchant in Japan, the revelation of accounting information will be less when compared to Nigeria or the United kingdom
Uniformity and Flexibility
This is the penchant to implement a unvarying accounting patterns between companies and the consistent usage of such patterns over clip as opposed to flexibleness in conformity with a company ‘s circumstance ( Grey 1988 ) . This is a cardinal accounting rule worldwide ( Nobes and Parker, 1985 ; Choi and Mueller, 1984 ; cited by Gray 1988 ) .
Gray ( 1988 ) demonstrated a nexus between the uniformity of a state ‘s accounting system and its cultural dimension. He states that the higher a state ranks in footings of uncertainness turning away and power distance and the lower it ranks in individuality so more likely it will rank extremely in footings of uniformity. An uncertainness avoiding state would hold rigorous regulations and codifications and there is likely to be regard for these regulations guaranting uniformity of accounting patterns. Furthermore Bolshevism, with its feature of high belief in administration and respects for group norms, will increase uniformity. A state like Saudi Arabia is likely to hold more uniformity in its accounting patterns than Nigeria. UK allows more flexibleness ( e.g. Holzer, 1984 )
Conservatism versus Optimism.
This is one of the most of import constructs in accounting because of its impact on accounting rating ( Greatest 1967 ) .Prudence in the measuring of assets and coverage of net income is termed conservativism and differs between states based on their cultural orientation ( see Beeny 1975, 1976 ; Arpan and Radebaugh, 1985 ) .Gray ( 1988 ) suggested that the more uncertainness avoiding a state is and the lower it ranks in footings of individuality and maleness, the more conservative it will probably be. The concern for security, demand for a cautious attack to get by with the uncertainnesss of future event would do an uncertainness turning away state to prefer conservative regulations in its accounting system. Low individuality and maleness will besides promote conservativism while the contrary will be the instance in high individuality states because of people ‘s desire to demo their accomplishments and the competition. Saudi Arabia will hold a more conservative accounting system than a state like Nigeria.
Valuess and Ethical motives
Valuess in a wide sense are inclinations to prefer certain province of personal businesss over others ( Hofstede, 1997 ) , while moralss refer to values that identifies a professional organic structure. There is a strong connexion between national societal value and professional values ( moralss ) that drives national accounting system ; ( Gray,1988 ) .The Nigerian value dimension provides a genteelness land for corruptness, which reduces professionalism and made hitherto corrupt patterns acceptable and allowed by hearer. The 10 per centum[ 2 ]construct is bit by bit going a recognized signifier of concern development. The professional comptrollers are non unaffected, there have been instances of unethical patterns and the professional organic structures ( ICAN and ANAN ) did nil to train their members. The instance of collusion by Akintola Williams deloitte to over province the histories of Cadbury PLC between 2003 and 2006 ( O.M Bakre, 2007 ) in which ICAN did non move and the sum of =N= 301b ( $ 2.15 ) declared losing from the books of Nigerian National Petroleum Corporation in 2002 entirely due to weak accounting pattern ( Guardian, 11 April 2002, cited by O.M.Bakre, 2007 ) are groundss of consequence of value on professionalism. These instances would hold been exhaustively investigated and perpetrators punished in states with good value civilization which translates into high degree of accounting professionalism like in USA and the U.K.
Religion is another cultural facet that impacts on how accounting issues are treated. In Saudi Arabia and other Islamic states, accounting dealing such as involvement on receivables, pension benefit, long-run debt amortisation, lease capitalisation and assets damage are non allowed by Islam ( Baydoun and Willett, 2000 p.82 ; Clarke et Al 1996 ) and would be treated significantly different from the manner these points would be treated in a more broad state like the U.K and USA.
This difference in cultural dimension of states and the consequence it has on their accounting patterns has made it hard to wholly harmonise the accounting system of states. The distinctive feature of national civilizations made states follow accounting patterns suited to their environment and civilization, ( Hamid et al 1993, 1996 ) . Ross, ( 1989 ) argues that given the same information, comptrollers from different states will bring forth different consequence in line with their state ‘s accounting patterns, yet the universe is a planetary economic system and transnational companies are listed in the stock market of different states. There is demand for International Accounting Standards that would supply a guideline for harmonisation since complete fusion might non be possible yet.
Hofstede ‘s ( 1980 ) cultural dimensions has been criticised on a figure of issues runing from the non-representativeness of the sample ( Robin,1983 ) to bias by utilizing merely Americans and Europeans to carry on the study ( Roberts and Boyacigiller, 1984 ) , yet the most outstanding is the fact that the current globalisation might hold rendered it out of day of the month ( Mead, 1994 ) . Gray ( 1988 ) scored high Markss on associating cultural influence to accounting pattern but was weak in explicating professional and regulative constructions from a cultural base ( Salter and Frederick, 1994 ) .
Furthermore the International Accounting Standards Board though acknowledged for its attempts has been criticised for occidentalizing the criterions by concentrating on U.K and USA and non sing that there could be insight from the patterns of other states ( Hamid, et Al, 1993 ) .
Decision
The consequence of cultural dimensions on accounting patterns can non be overemphasised. The civilization of states has shape their penchants on ways of life and making things, accounting pattern inclusive. This has resulted in the divergency that is seen in the accounting patterns among states. The mutuality of the economic system of states has made the call by ISAB[ 3 ]for the harmonisation and ( or ) convergence of accounting patterns of states with International Accounting Standards to heighten comparison and understanding a welcomed development.
